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HELP loans indexed by 3.9 per cent

Student loans are indexed to the consumer price index, which has seen substantial inflation this year.

Student loan debts increased by 3.9 per cent yesterday after the annual indexation to the consumer price index was applied. The indexation occurs on 1 June each year and is applied to study and training loans, including Higher Education Loan Program (HELP) and VET Student Loan (VSL) debts. 

No interest is charged on Australian public student loans, but they are indexed in line with inflation in order to maintain the real value of the loan. 

This year’s indexation occurs in the context of rising inflation, with the Australian Bureau of Statistics (ABS) measuring a consumer price index of 5.1 per cent for the March 2022 quarter. This means that the change in price of an average set of goods and services in metropolitan areas has risen by 5.1 per cent compared to March 2021.

This year’s indexation represents a departure from a recent period of low inflation. In 2021, student debt increased by only 0.6 per cent. The next highest indexation in the last decade occurred back in 2014, when debts increased by 2.6 per cent.

The indexation of student debt would have a negligible effect on students’ repayment if average wages were to rise with inflation. The ABS’ reported wage price index figure for March 2022 was 2.4 per cent, suggesting that wages are not currently keeping pace with inflation. This means that at least for this period, increased debt is not being matched by increases in earnings. 

According to the ABS, 2.9 million Australians had outstanding HELP debt in 2020-21. The average HELP debt was $23,685, an increase from previous years, with the number of graduates with over $50,000 of debt also increasing. An indexation of 3.9 per cent on this average debt would result in a $924 total increase in debt.